The Effects of Social Security and Financial Development on Saving and Fertility Behaviour in Iran

Most countries have experienced an increase in retirement costs and a decline in fertility from about a century ago. Because the increase in the aging population and reducing fertility will lead to major problems in protecting the elderly in the near future, the paper aims to ascertain the extent to which saving and fertility decisions are affected by the availability and attractiveness of market-based or state-provided alternatives to the family as a source of old-age support. Therefore, saving and fertility equations are estimated by Johansen and Joselius cointegration method from Iranian time-series data over the period 1973-2017. Our results show that the expansion of social security coverage and the development of financial markets have a negative and significant effect on fertility. Also, expanding social security coverage has a negative effect on savings, while improving financial development has a positive and significant effect on saving. The empirical findings appear to support the hypothesis that individual decisions are motivated by intergenerational altruism rather than self-interest.